INFLATION RISES TO SIX-MONTH HIGH
The rate of inflation in the UK unexpectedly jumped to a six-month high in August, confounding economists and policymakers who were widely expecting price pressures to ease.
ONS data showed that the Consumer Prices Index 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 2.7% in August, up from 2.5% in July. This left this measure of inflation at its highest level since February 2018 and defied the consensus amongst economists that the rate would fall to 2.4%.
August’s increase was largely driven by rising prices for recreational goods, transport and clothing. Commenting on the figures, Mike Hardie, head of inflation at ONS, said: “Consumers paid more for theatre shows, sea fares and new season autumn clothing.” The latest inflation numbers will come as an unwelcome surprise to Bank of England (BoE) officials who were among those predicting a cooling of inflationary pressures. In early August, the BoE raised interest rates for only the second time in over a decade in order to ensure that it fulfils its obligation of keeping consumer price inflation at around 2%.
Rates were left unchanged in September and the BoE stuck to its previous guidance that any further monetary tightening would be only ‘gradual and limited in extent’. Indeed, the minutes from the September meeting suggested a more cautious approach if anything, driven by rising fears that the UK may leave the EU without a deal and the negative impact this would have on the economy. The unexpected jump in August’s inflation figure is therefore unlikely to force an imminent rethink in the BoE’s monetary stance. Instead, the BoE is widely expected to favour leaving rates unchanged in the short term, at least until greater clarity emerges in relation to Brexit.
It is important to take professional advice before making any decision relating to your personal finances. Information
within this document is based on our current understanding and can be subject to change without notice and
the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored
investment advice and is for guidance only. Some rules may vary in different parts of the UK.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.
Fill in the form below and one of our experts will be back to you within 24 hours.